F-Secure Corporation interim report, 24.04.2014 09.00 (EEST)

Cloud strategy progressing as planned, Financials as anticipated

Highlights in Q1

  -- Total revenues were 39.1 million (38.4m) showing growth of 2%
  -- EBIT was 5.1 million representing 13% of revenues excluding one-off costs
     of 2.9 million  (5.9m,15% of revenues)
  -- Earnings per share was EUR 0.01 (EUR 0.03 )
  -- Cash flow from operations was 6.1 million positive (7.4 m positive); change
     in cash 4.9 million positive (5.6 m positive)
  -- Cloud strategy is progressing as planned


Outlook for 2014 - management's estimation for the year remains unchanged

  -- Revenue is estimated to grow from 2013 with stronger second half
  -- Profitability is estimated to be around 15% of revenues excluding one-off
     costs

Key figures               2014  2013   2013
-------------------------------------------
(Eur Million)              1-3   1-3   1-12
-------------------------------------------
Revenues                  39.1  38.4  155.1
-------------------------------------------
Operating profit*          5.1   5.9   27.1
-------------------------------------------
% of revenues*              13    15     17
-------------------------------------------
Profit before taxes*       5.3   6.0   26.3
-------------------------------------------
Earnings per share (Eur)  0.01  0.03   0.11
-------------------------------------------
At the end of period:     39.9  38.9   38.7
Deferred revenues                          
-------------------------------------------
                                           
-------------------------------------------
ROI%                        14    38     41
-------------------------------------------
Equity ratio, %             73    75     74
-------------------------------------------
Debt-to-equity ratio, %    -71   -56    -66
-------------------------------------------
Personnel                  941   938    939
-------------------------------------------




(This report is unaudited. Unless otherwise stated the comparisons refer to the
corresponding period a year ago. The currency is euro. *Q114 excludes 2.9 m of
one-off costs) 


President and CEO Christian Fredrikson:

The security industry is undergoing a major change. The Software-as-a-Service
business model and cloud-based delivery are rapidly disrupting the traditional
way of doing business. Everything is going to the cloud, including data and
security. Traditional security will be replaced by cloud-based security that
protects all Internet-connected devices. Therefore I am satisfied that our new
cloud strategy has progressed as planned. We are continuing to launch
innovative new cloud-based products to SMB customers as well, to further
penetrate the emerging cloud markets. 

Our Q1 financial performance was as anticipated. While traditional PC-centric
security sales are in slow decline along with the whole PC market, our focus
businesses based on our cloud strategy are experiencing very healthy growth.
Overall, the Company's financial position is solid with healthy cash flow and
profitability. We are on track with the given guidance for the year. 

We have made good progress in the personal cloud business. We are rolling out
cloud services with several new operators and are winning new partnerships. 
Our security business is overall solid. Security sales based on our cloud
strategy are delivering strong growth. I am especially satisfied with the
progress of Freedome, our next-generation security product fully powered by the
cloud. It is gaining a lot of attention and is off to a good start with
consumers. 

In a post-Snowden world, we need to stand out and have a strong point of view
on issues relating to individual privacy and digital liberties. Our new slogan
Switch on Freedom summarizes our mission to fight for digital freedom. We
protect people's privacy and enable their safe use of the Internet. As I look
ahead to the rest of the year, I am confident that we are on the right track to
turn the Company back to growth. 


F-Secure Financials January - March 2014

Total revenues grew by 2% to 39.1 million (38.4m). Revenues through the
operator channel grew by 4% from the previous year to 24.1 million (23.1m),
representing 62% (60%) of F-Secure's total revenues. Revenues through the other
channels decreased by 1% totaling 15.1 million (15.2 m). These channels
represented 38% of F-Secure's total revenues (40%). Deferred revenues were at
the end of the quarter 39.9 million (38.9 m). 

EBIT was 2.3 million or 5.1 million excluding one-offs of 2.9 million related
to overall restructuring costs (5.9 m), representing 6% or 13% (15%) of
revenues. Earnings per share were EUR 0.01 (EUR 0.03). Cash flow from
operations was 6.1 million positive (7.4 m positive). The change of net cash
was 4.9 million positive (5.6 m positive). 

Total fixed costs were 35.7 million or 32.8 million excluding one-offs of 2.9
million related to Bordeaux re-organization and efficiency gains (31.6m), an
increase of 13% or 4% from the previous year related to investments in R&D and
in Sales and Marketing activities to focus businesses and geographical
expansions. Depreciations (R&D activations, software, hardware) increased to
2.3 million (2.1m). The capitalized development expenses were 0.5 million (0.3
m). 

The Q1 geographical breakdown of revenues was as follows: Finland and
Scandinavia 32% (30%), Rest of Europe 46% (46%), North America 10% (11%) and
Rest of the World 12% (13%). 

F-Secure business in Q1

In Q1, the Company's personal cloud business continued its good progress. The
personal cloud based on younited technology continues to gain traction with
operators. Some of the latest operator launches were Elisa's Saunalahti
Pilvilinna (Finland), Virgin Media Cloud (UK) and Primacom (Germany). The
Company also has won several new operators. In total, the Company has close to
20 operator partnerships with younited. The direct consumer younited offering
has been launched and new activities to get subscribers are in execution. 

Security sales overall were as planned. Security sales based on the cloud
strategy are delivering strong growth. The Company's focus businesses in
security (which consist of our converged PC and mobile security offering, SAFE,
our SMB security service, Protection Service for Business, and Freedome) are
getting good traction and compensating for declining sales in traditional PC
security. The Company has launched our new SAFE service with several operators;
e.g. Play (Poland), Netia (Poland), Stofa (Denmark) and TIM, Italy's largest
operator. The Company has launched directly to consumers Freedome, our
next-generation security product fully powered by the cloud. It has been
launched in app stores and is gaining a lot of attention. Further launch
activities are taking place in Q2. 

The Company is investing in R&D in addition to Sales and Marketing activities
related to the focus businesses. These businesses consist of SAFE, Protection
Service for Businesses, Freedome, and younited. 

Geographically, the Company continues its expansion in Latin America with
Telefonica and American Moviles.  The other investment area is the SMB focus in
Germany, France and USA. The Company is also investigating new geographical
entries in the APAC area. 


Product Announcements in Q1


During the quarter the key product announcements were as follows:

Freedome, our next generation cloud-based security and online privacy product,
has been launched in selected European countries and the US. Freedome is the
first product of its kind and lets the user be untrackably invisible while
surfing online. The app has also been made available also for Apple devices in
Q1. 
Read more about Freedome on http://freedome.f-secure.com/

F-Secure Key stores your passwords, user names and other credentials so that
you can conveniently access them wherever you are through one master password.
Having been launched initially in late 2013, in Q1 F-Secure Key was launched in
the Portuguese and Spanish language versions, focusing especially on the Latin
American markets. 
Read more about Key on http://www.f-secure.com/key

F-Secure SAFE, a solution that offers multidevice protection, was made
available globally in several language versions in February. SAFE was
previously launched in late 2013 in the UK and US with the English language
version only. 
Read more about SAFE on http://www.f-secure.com/en/web/home_us/safe


During Q1/14 we expanded the banking protection capabilities available in our
Safe Anywhere solution to cover smartphones and tablets as well. Mobile devices
are increasingly used for banking, stock brokering and other financial
transactions. Safe Anywhere also incorporates Safe Search capabilities. The
Safe Search solution that was launched in Q4/13 has been well received by
consumers and even within a single quarter, we are already witnessing millions
of visits to the service. 


Younited by F-Secure announced in April 2014 a brand new way for people to
collectively share photos and videos of life's events, big and small, public
and private, in real time, all in one place. Hundreds of millions of photos are
shared online per day, and the best method of grouping them has been the
hashtag - until now. Younited Events is a new, free app from younited by
F-Secure that lets people share their moments from live events - weddings,
birthdays, festivals, concerts, conferences, seminars or just the cottage trip
with friends - all in one place from all users at the same event in real-time.
Events has raised the interest of well-known event organizers and media
companies who are planning partnerships with F-Secure. 

Read more about younited Events on https://app.younited.com/events


Risks and uncertainties

F-Secure's risks and uncertainties are related to, among other things, the
competitiveness of F-Secure's product portfolio, competitive dynamics in the
industry, market fluctuations, pricing models (e.g. free services, cost of
content cloud services), FX changes, impact of changes in technology, timely
and successful commercialization of complex technologies and new products and
solutions, the ability to protect intellectual property (IPR) in F-Secure's
solutions as well as the use of third party technologies on reasonable
commercial terms, subcontracting relationships, regional development in new
growth markets, sustainability of partner relationships, compromising stored
personal data, service quality related penalties, and risk exposure from
increasing contractual liability requirements and forming of the new business
areas. 

Events after period-end

No material changes regarding the Company's business or financial position have
materialized after the end of the quarter. 


Reorganizing operations

This reorganizing and negotiations of operations in F-Secure SDC (France) is
ongoing and may impact up to 22 positions. The impact of these are included in
one-off costs of 2.9 million in Q1. 


Annual General Meeting 2014

The annual general meeting (AGM) was held on April 3, 2014. The Meeting
confirmed the financial statements for the financial year 2013. The members of
the Board and the President and CEO were granted a discharge from liability.
The AGM approved all proposals made by the Board. The new board consists of
Risto Siilasmaa (chairman of the Board and executive committee, EC), Anu
Nissinen (member, EC), Juho Malmberg (member, EC), Pertti Ervi (chairman of
audit committee, AC), Jussi Arovaara (member, AC), Matti Heikkonen (member, AC)
and Peter Vesterbacka (member, AC). The decisions of the AGM can be found in
stock exchange release on April 3, 2014 and in the Company's web pages. 


Personnel and Organization

F-Secure's personnel totaled 941 at the end of the quarter (938).

Currently, the Leadership Team consists of the following persons: Christian
Fredrikson (President and CEO), Janne Juvonen (Customer and Market Operations),
Samu Konttinen (Consumer Security Business), Timo Laaksonen (Content Cloud
Business), Johanna Orjatsalo (Human Resources & Facilities), Pirkka Palomäki
(Chief Strategy Officer), Jari Still (R&D Operations), Pekka Usva (Corporate
Security Business) and Taneli Virtanen (Chief Financial Officer). 


Financing and Capital Structure

Cash flow from operations for the quarter was 6.1 million positive (7.4m
positive). The change of net cash was 4.9 million positive (5.6 m positive).
Net financial income was positive at 0.1 million (positive 0.1m). 

The market value of the liquid assets of F-Secure at the end of the quarter was
53 million (38.7m). Changes in exchange rates, especially USD, JPY, SEK and
BRL, impacted negatively on sales and positively on costs. 

The Company's capital expenditure for the quarter was 1.1 million (1.5 m). The
capitalized development expenses were 0.5 million (0.3m). 

F-Secure's financial position remained solid. F-Secure's equity ratio at the
end of the quarter was 73% (75%) and gearing ratio was 71% negative (56%
negative). 


Shares, Shareholders' Equity, Own Shares and Option Programs

The total number of Company shares is currently 158,798,739. The Company's
registered shareholders' equity is EUR 1,551,311.18. Currently, the Company
holds 3.036.244 own shares. 

The Board of Directors approved a new long term share-based incentive program
for the key personnel on April 23, 2014. The share-based program consists of
three earning periods commencing in 2014, 2015 and 2016. Each earning period
lasts three years. Maximum reward is capped to 10 million shares in total over
the whole program. The Board approves the metrics, targets and participants on
annual basis for each earning period. 


Corporate Governance

F-Secure complies with the Corporate Governance recommendations for publicly
listed companies published by the Securities Market Association, a body
established by the Confederation of Finnish Industries EK, the Central Chamber
of Commerce and NASDAQ OMX Helsinki Ltd., as explained on F-Secure's web pages.
F-Secure published its corporate governance statement for 2013 in the Annual
Report and on the Company website. 


Market Overview, long term objectives and strategy 2014-16

The software business is in transition. The Software-as-a-Service business
model and cloud-based delivery are rapidly disrupting the traditional way of
doing business. The Company strategy has communicated its renewed strategy in
February, Q4 interim stock exchange release. The Company is focusing on
cloud-based initiatives to serve and protect the post-PC era multi-device
environment. During the strategy period 2014-2016, the Company aims to grow the
overall subscriber base by tens of millions of users and seeks accelerating
revenue growth. As the Company invests in growth, the relative profitability
remains at its current level and longer-term profitability continues to be
driven by revenue growth and scalable operations. 

Further details of the market overview and the strategy can be found on Q4
interim release (February 5, 2014) and in the Company's web pages. 
http://www.f-secure.com/en/web/corporation_global/company/vision-and-strategy


Outlook for 2014

Investments during 2014 focus on acquiring a significant subscriber base and
bringing new cloud-based products successfully to the market. The revenue
growth is expected to come from the Company's focus businesses, consisting of
converged PC and mobile security (SAFE), Protection Services for Business,
personal cloud (younited) and security from the cloud (Freedome). Traditional
PC security sales are expected to be in decline. Geographically, Latin America
is expected to continue as a growth driver. New fully cloud-based products are
expected to contribute to growth towards the year's end. Personal cloud sales
in the form of F-Secure's younited product are expected to develop favorably
through operators, consumers, and small and medium business users. 

Growth is expected especially from annual subscriptions of security and content
cloud products. As a consequence, estimated sales growth is higher than revenue
growth in 2014 while deferred revenues increase due to periodising of
subscription sales. 

The company expects overall one-off costs in 2014 to be less than 3 million
related to efficiency improvements and reorganization in F-Secure SDC (France).
The Company has accrued and paid 2.9 million that has been recognized in Q1
financials. 

The management's estimation for the year is unchanged; the annual revenue is
estimated to grow from 2013 with a stronger second half. The annual
profitability is estimated to be around 15% of revenues excluding above
mentioned one-off costs. 

The revenue estimate is based on the sales pipeline at the time of publishing,
existing subscriptions and support contracts as well as current exchange rates.
The Company continues to prioritize growth over short-term profitability and
plans to invest the majority of the improved earnings in growth opportunities
in its core business. 


News conference today at 11 am

A news conference for analysts and press is arranged today, April 24, at 11 am
Finnish time at F-Secure's Headquarters, address: Tammasaarenkatu 7,
Ruoholahti, Helsinki. At the news conference, President & CEO Christian
Fredrikson will present the Q1 financial results. 

An online meeting for international investors and analysts will be held (in
English) on the same day at 2.00 p.m. (EEST). To participate in the online
meeting, click on the link below: 

https://meet.F-Secure.com/gia.forsman-harkonen/8948VZMM

To participate in the online meeting through phone, please dial in to
+358975110100. Conference ID is 5843466. 

The webinar will be organized through Lync to enable a better experience with
video and presentation also for the international investors and analysts. If
you have not used Lync before, need to download and install it, or need more
advice on how to use it, please visit 


http://r.office.microsoft.com/r/rlidOC10?clid=1033&p1=4&p2=1041&pc=oc&ver=4&subv
er=0&bld=7185&bldver=0 


It is possible to participate through the Lync web application, but please note
that this will not have sound and it is necessary to also call in to the
meeting via phone. 

The Q1 financial results presentation material, including a video where
Christian Fredrikson will present Q1 results, will be available on our
Investors web pages at www.f-secure.com under About F-Secure, Investors before
the call begins. 


Financial calendar for 2014

F-Secure Corporation will publish its interim reports during 2014 as follows.

Interim Report for Q22014 - July 24, 2014
Interim Report for Q32014 - October 23, 2014


F-Secure Corporation

Additional information

F-Secure Corporation
Christian Fredrikson, President and CEO
tel. +358 9 2520 0700

Taneli Virtanen, CFO
tel. +358 9 2520 5655




This interim report is prepared in accordance with IAS 34 standard Interim
Financial Reporting and with accounting principles stated in the annual report
2013 and with the IFRS 12 -standard effective as of 1 January 2014. 



Key figures (unaudited):                           
---------------------------------------------------
(EUR million)                                      
---------------------------------------------------
INCOME STATEMENT          2014  2013  Change   2013
---------------------------------------------------
                           1-3   1-3     %     1-12
---------------------------------------------------
Revenues                  39.1  38.4     2    155.1
---------------------------------------------------
Cost of revenues           2.0   1.7    20     7.0 
---------------------------------------------------
Gross margin              37.2  36.7     1    148.1
---------------------------------------------------
Other operating income     0.8   0.8     5     2.7 
---------------------------------------------------
Sales and marketing       22.1  18.4    20     73.6
---------------------------------------------------
Research and development  11.5  10.7     8     41.7
---------------------------------------------------
Administration             2.0   2.5   -18     8.4 
---------------------------------------------------
Operating result           2.3   5.9           27.1
---------------------------------------------------
Financial net              0.1   0.1           -0.7
---------------------------------------------------
Result before taxes        2.4   6.0           26.3
---------------------------------------------------
Income taxes              -0.7  -1.9           -9.9
---------------------------------------------------
Result for the period      1.7   4.1           16.5
---------------------------------------------------



Other comprehensive income:                                                  
-----------------------------------------------------------------------------
Exchange diff. on translating                                 0.0   0.1  -0.1
foreign operations                                                           
-----------------------------------------------------------------------------
Available-for-sale fin. assets                                0.2   0.0   0.1
-----------------------------------------------------------------------------
Income tax rel. to components of other comprehensive income   0.0   0.0   0.0
-----------------------------------------------------------------------------
Total compr. income (owners)                                  1.8   4.2  16.5
-----------------------------------------------------------------------------
Earnings per share. EUR                                      0.01  0.03  0.11
-----------------------------------------------------------------------------
EPS diluted. EUR                                             0.01  0.03  0.11
-----------------------------------------------------------------------------





BALANCE SHEET                        31/3/2014  31/3/2013  31/12/2013
ASSETS                                                               
---------------------------------------------------------------------
Intangible assets                       16.1       20.4       16.8   
---------------------------------------------------------------------
Tangible assets                         7.9        9.7        8.3    
---------------------------------------------------------------------
Goodwill                                19.4       19.4       19.4   
---------------------------------------------------------------------
Other financial assets                  4.3        5.1        4.4    
---------------------------------------------------------------------
Non-current assets total                47.7       54.5       49.0   
---------------------------------------------------------------------
Inventories                             0.2        0.2        0.3    
---------------------------------------------------------------------
Other receivables                       41.2       38.2       39.5   
---------------------------------------------------------------------
Available-for-sale financial assets     34.0       23.0       25.7   
---------------------------------------------------------------------
Cash and bank accounts                  19.1       15.9       22.2   
---------------------------------------------------------------------
Current asset total                     94.6       77.3       87.7   
---------------------------------------------------------------------
Total                                  142.3      131.8       136.6  
---------------------------------------------------------------------



SHAREHOLDERS' EQUITY           31/3/2014  31/3/2013  31/12/2013
AND LIABILITIES                                                
---------------------------------------------------------------
Equity                            74.7       69.5       72.8   
---------------------------------------------------------------
Other non-current                 0.4        0.4        0.4    
---------------------------------------------------------------
Provisions 1)                     2.4        0.1        0.0    
---------------------------------------------------------------
Deferred revenues                 4.7        8.8        9.2    
---------------------------------------------------------------
Non-current liabilities total     7.5        9.3        9.5    
---------------------------------------------------------------
Other current                     24.9       22.8       24.8   
---------------------------------------------------------------
Deferred revenues                 35.2       30.1       29.6   
---------------------------------------------------------------
Current liabilities total         60.1       53.0       54.3   
---------------------------------------------------------------
Total                            142.3      131.8       136.6  
---------------------------------------------------------------





CASH FLOW STATEMENT                             31/3/2014  31/3/2013  31/12/2013
--------------------------------------------------------------------------------
Cash flow from operations                          6.1        7.4        28.5   
--------------------------------------------------------------------------------
Cash flow from investments                         -1.2       -1.8       -4.0   
--------------------------------------------------------------------------------
Cash flow from financing                           0.0        0.0        -9.3   
Activities 2)                                                                   
--------------------------------------------------------------------------------
Change in cash                                     4.9        5.6        15.2   
--------------------------------------------------------------------------------
Cash and bank at 1 Jan                             47.8       33.1       32.4   
--------------------------------------------------------------------------------
Change in net fair value of Available-for-sale     0.2        0.0        0.1    
--------------------------------------------------------------------------------
Cash and bank at end of period                     53.0       38.7       47.7   
--------------------------------------------------------------------------------




Statement of changes in shareholders' equity



            Share   Share    Unrestr.  Treasur  Retaine   Assets   Tranl.  Total
           ca-pit   prem.    equity       y        d      avail.    diff        
             al     fund     reserve    shares  earning   f.sale                
                                                   s                            
--------------------------------------------------------------------------------
Equity      1.6      0.2       5.1      -7.8     73.5       0.3     -0.1    72.8
 on:                                                                            
31.12.201                                                                       
3                                                                               
--------------------------------------------------------------------------------
Total                                             1.7       0.2             1.9 
comprehen                                                                       
sive                                                                            
income                                                                          
for the                                                                         
 year                                                                           
--------------------------------------------------------------------------------
Cost of                        0.1       0.7     -0.6                       0.1 
share                                                                           
 based                                                                          
 payments                                                                       
--------------------------------------------------------------------------------
Equity on   1.6      0.2       5.1      -7.1     74.6       0.5     -0.1    74.7
31.3.2014                                                                       
--------------------------------------------------------------------------------



NOTES

 1)The one-offs due to restructuring of the French subsidiary are

 approximately 2.4 million euros.



 2)Cash flow from financing

Dividend for year 2013 0.06 euro per share totaling 9.345.749,70 euro was paid
on 15th April 2014. In 2013 paid dividend totaled 9.322.974,24 euro. 



Key ratios                        2014   2013   2013
----------------------------------------------------
                                  3 m    3 m    12 m
----------------------------------------------------
Operating result % of revenues    5.8    15.4   17.5
----------------------------------------------------
ROI %                             13.8   38.0   40.9
----------------------------------------------------
ROE %                             9.2    25.5   24.9
----------------------------------------------------
Equity ratio, %                   73.0   74.8   74.3
----------------------------------------------------
Debt-to-equity ratio %           -70.8  -55.8  -65.6
----------------------------------------------------
Earnings per share, EUR           0.01   0.03   0.11
----------------------------------------------------
Earnings per share diluted. EUR   0.01   0.03   0.11
----------------------------------------------------
Shareholders' equity              0.47   0.44   0.46
per share, EUR                                      
----------------------------------------------------
P/E ratio                         55.2   16.1   17.6
----------------------------------------------------
Capitalized expenditures, MEUR    1.1    1.5    3.7 
----------------------------------------------------
Contingent liabilities, MEUR      10.4   15.9   12.2
----------------------------------------------------
Personnel average                 941    940    949 
----------------------------------------------------
Personnel end of period           941    938    939 
----------------------------------------------------





Segment information



The Group has only one segment; data security.



Quarterly development   1/13  2/13  3/13  4/13  1/14
----------------------------------------------------
Revenues                38.4  38.4  38.3  40.0  39.1
----------------------------------------------------
Cost of revenues         1.7   1.8   1.5   2.1   2.0
----------------------------------------------------
Gross margin            36.7  36.6  36.8  37.9  37.2
----------------------------------------------------
Other operating income   0.8   0.7   0.3   0.9   0.8
----------------------------------------------------
Sales and marketing     18.4  19.8  17.8  17.6  22.1
----------------------------------------------------
Research and            10.7  11.1   9.5  10.4  11.5
development                                         
----------------------------------------------------
Administration           2.5   2.4   1.5   2.1   2.0
----------------------------------------------------
Operating result         5.9   4.0   8.4   8.8   2.3
----------------------------------------------------
Financial net            0.1  -0.2  -0.6  -0.1   0.1
----------------------------------------------------
Result before taxes      6.0   3.8   7.8   8.7   2.4
----------------------------------------------------



Geographical information



Revenue            1-3/2014  1-3/2013  1-12/2013
------------------------------------------------
Nordic countries     12.5      11.3       47.5  
------------------------------------------------
Rest of Europe       18.1      17.8       70.0  
------------------------------------------------
North America         3.9       4.4       17.8  
------------------------------------------------
Rest of the world     4.6       4.9       19.8  
------------------------------------------------
Total                39.1      38.4      155.1  
------------------------------------------------



Fair values

The carrying amounts of the Group's financial instruments are equivalent to
fair values. 



Assets measured at fair value                   Total  Level 1  Level 2  Level 3
--------------------------------------------------------------------------------
Available-for-sale financial assets 31.3.2014    34.0   33.9               0.1  
--------------------------------------------------------------------------------
Available-for-sale financial assets 31.3.2013    23.0   22.9               0.1  
--------------------------------------------------------------------------------
Available-for-sale financial assets 31.12.2013   25.7   25.6               0.1  
--------------------------------------------------------------------------------
            
Attachments:F-Secure_Q1_24042013_EN.pdf